“Apple could buy back 25% of its stock over the next three years as it brings home foreign cash, according to a new analysis from UBS analyst Steven Milunovich,” Jack Hough reports for Barron’s. “That buying is likely to provide support for shares as iPhone unit growth slows, and services and other businesses play a more important role.”
“A U.S. corporate tax overhaul allows — forces, really — companies to repatriate foreign cash at a tax rate much lower than the one they would have paid under the old system,” Hough reports. “That’s highly relevant to Apple, which ended last year with $252 billion in overseas cash and investments.”
Hough reports, “Combined with Apple’s existing spending on shares, that means the company could purchase $173 billion of its stock over the next three years, with the largest portion of the spending front-loaded into this year.”
Read more in the full article here.
MacDailyNews Take: Every share retired theoretically makes every share that remains more valuable.
Another $125 billion in buybacks would be seismic. – MacDailyNews, November 18, 2016
SEE ALSO:
UBS: Buy Apple as company could acquire more than $120 billion of its stock in two years – January 8, 2018
Will certainly be fun to see how this plays out for AAPL investors!
Long on AAPL 👍
Do you actually think more buybacks will be good for Apple shareholders? Wall Street is always saying how buying back shares is foolish and that Apple should be doing acquisitions to boost revenue and value like all the other major tech companies are doing.
Amazon is always doing acquisitions and is gaining share value at a tremendous rate and making Apple look downright pathetic. While Apple has hit a wall in growth, Amazon is still accelerating. Amazon is certainly going to pass Apple in overall value in this year. Tim Cook is good but not nearly as aggressive as Jeff Bezos.
Share buyback complete waste of money with Apples current dilemma they need to spend money on infrastructure and finding qualified people to build great products. They maybe making money today but dear god they’re a mess
Bob, you know too, that the lowering of the tax rate does encourage companies to go overseas and make money. Well, see now, they can make money overseas and have it taxed at a lower rate then the would pay here in the States on that money. See they love having an idiot for president, no one is watching the store, donald trump = liar, is truly the no one they want. It is like the lights went out in New York City.
Sorry, New Yorkers, it’s just you guys are the last one, blackout, I remember where looting took place. Hey, but let’s be clear it would happen anywhere. …And to that point, the SEC and IRS and FBI have been hobbled, by that crook donald trump = liar, so the thieves are out. Have you seen Wall Street. I mean what has happened for such a run up on the thirty companies. Are they selling way more product? NO Are they all overseas with big pockets of money? NO It does not even make speculation sense. This is supply side economics. So many wanting so few, and it is driving up the price of the shares. It is crazy that someone would invest in a company that has a share price many, many, many times than what the company could possibly earn… 401Ks, market funds, institutional investors, etc, all needing something to buy… 14 times earning, please, and that suppose to be a good deal.
See if they really wanted to invest in this country or every country they would increase the dividend. Shareholders would spend the money and or be taxed on it. How have some many become brainwashed of waste, Every company has waste, sometimes tons of it, and no they don’t all go out of business. Take donald trump = liar for example, he just kept living off of the banks’ money, those stupid enough to give him any. Loaned money spends like earned money. Why allow a deduction for loaned money? or even think of that money differently. Hahahaha, it should be thought of as income, it spends just like earned money… get enough to cover the need and the taxes. hahahaha. Simplify the tax code, what joke.
U got some major chips on your shoulder dont u !
so I know you hit your head again. It must of happened early on when you were talking to Bob. Soon after you mentioned lower taxes, I can only assume something came though the window at a high rate of speed?
BOB, I am no fan of Trump, but that is quite a diatribe that you posted. It is very hard to follow. I realize that pro-Trump people on this forum have posted similar stuff, but that doesn’t make it right. Let’s lay off the partisan stuff.
With respect to the recent tax “reform,” you have some points. It was not well thought out. It was also a silly time to increase borrowing to finance tax cuts to stimulate the economy when we are already running a $660B deficit on top of an accumulated debt of over $20T. Where have the fiscally responsible politicians gone?
A U.S. corporate tax overhaul allows — forces, really — companies to repatriate foreign cash at a tax rate much lower than the one they would have paid under the old system
Forces? No.
A lower rate than last year? Obviously. But whether any US corporation will bother to ‘repatriate’ / bring home their foreign made profits is not a done deal. The new rate is NOT low enough to meet the suggested rate from Tim Cook a couple years back in front of the US Congress. In Apple’s case, the EU years-after-the-fact attempt at taxing Apple in Ireland, is going to be a factor.
IOW: All we have right now is a steaming pile of the usual analCyst BS making assumptions that may have NO relevance to reality. We can only wait and see how this plays out.
At least the Retardlicans got a couple things right in their tax-scam giveaway to our wealthy and corporate overlords. This is potentially one of them.
As I’ve consistently pointed out, despite rubbish arguments to the contrary: ALL of Apple’s profits should be coming into the USA. Foreign made profits should OBVIOUSLY be taxed at a far lower rate than US profits. It astounds me how few people ‘get it’. That money will obviously benefit my country. Duh.
Agreed, this is not a “forced” in as much as it is an “increases motivation”.
And you’re right: there’s still lots of BS that needs to play out. For example, people have made the assumption that there’s a REASON for Apple to want to move the money (because the tax hit is effectively only on money which gets moved).
For example, if Apple wants a bag of money to invest in a new factory, then it matters where that factory is: if its in the USA, the money will need to come to the USA … but if the factory’s to be built in China, why oh why would they want to route the money through the USA, since that would incur a tax hit?
At one time the intention was to apply U.S. taxes whether or not the money was actually repatriated. The idea was to remove any remaining disincentive to park international profits overseas. But I don’t know if that made it into the final bill that Trump signed. With all of that last minute editing and vote-buying (bribing and bullying), I never learned all of the details of what was actually signed into law. I can pretty much guarantee three things – (1) Despite his claims leading up to the law, it ended up benefitting Trump and his family quite a bit, (2) Despite Trump’s claims that his wealthy friends would be mad at him, they will end up gaining most of the benefit via passthrough businesses, etc., and, (3) The annual deficits will remain higher than they otherwise would have been as a result of the tax cuts because they are not going to pay for themselves. Simple math.
Oh, one other thing – Mexico will never pay for “the wall.”
There are a few articles on the net breaking down the new tax bill. I have no doubt the rightists will go mental over the links. But here are a couple anyway:
https://www.washingtonpost.com/news/wonk/wp/2017/12/15/the-final-gop-tax-bill-is-complete-heres-what-is-in-it/
https://www.nytimes.com/interactive/2017/12/15/us/politics/final-republican-tax-bill-cuts.html
The only podcast I’ve found that provides some explanation is from HBR IdeaCast via the Harvard Business Review. Look for episode #609 “Breaking Down The New US Corporate Tax Law” from December 26, 2017.
Please Timmy C. >>No one time dividend to reward the traders<<, increase quarterly dividends to accommodate the investors who stuck it out on all the controversies. EG, options backdating, bogus anntennagate, etc. etc.
So is Apple taking itself orivate then? If it does it wont have to pay dividends to itself and would not have to answer to shareholders.
No! No! No!
We have covered this many times. A corporation cannot “take itself private” using shareholder assets. That makes no sense at all. To take a company private, the new owner(s) have to buy out the existing shareholders with *their* money or loans or stock from other companies or some combination of those.
A corporation, by definition, has shareholders and will always have to answer to them (to some degree, anyway).
“Jack Hough reports for Barron’s. “That [share] buying is likely to provide support for shares as iPhone unit growth slows, and services and other businesses play a more important role.”
Hough has not done his homework. Revenue is revenue, no matter where it comes from.
Even if iPhone unit sales go flat for the next 4 years, iPhone revenue will increase by about 4% per annum as LCD iPhones are phased out of Apple’s iPhone product lineup, and replaced with more expensive OLED iPhones.
So even if Apple were to cease reducing AAPL share count, the value of AAPL will increase because of higher iPhone ASP. For the record iPhone ASP, with the introduction of the iPhone 6, ASP grew 11+% YoY. As 4” iPhones were phased out over the years ASP increased.
“Every share retired theoretically makes every share that remains more valuable.”
There’s nothing theoretical about it.
Since Apple has commenced buying shares Net Income has grown annually an average of 8.78%, while EPS has grown an annual average of 14.42%.
Simply put, as Apple’s pie has grown over the last 4 years, the portion of that pie a single share represents has grown even faster.
A significant portion of AAPL’s price increase of the last 4 years is directly attributable to share count reduction.
Gregg…sincerely.
I think AAPL price is too high for a buyback. You can buy half of the Silicon Valley with that money. Smart investments in acquiring talent would be better. Buy all companies that can make Siri smarter for Pete’s sake. Catch up with machine learning or you will die a dinosaur. AR, which Tim focuses so much on so far has been a joke and will remain so until the “cumbersome” factor can be taken out with the hardware innovation.
Can not agree more on siri and AI end…BIIIIIG TIME…… Not doing it is not even an option….. its do or die !
Im not holding my breath ..but hopefully on Feb 13, after shareholders meeting we will get some clue …
I want to see that money used for dividends not buypacks. I want to see that money actually used to make more manufacturing capasity and then dividents. Apple has to start making cars and robots. 😉
Buybacks, prior to 1983, were considered market manipulation and were illegal. They are still artificial manipulation, and shouldn’t be allowed unless the shareholders voluntarily give up their shares to the company. No company should be able to just purchase their own shares on the open market… nonsense. Secondly, Apple is incredibly undervalued and it has never made any sense to me. I guess solid fundamentals don’t count anymore? And how can having $250 billion in cash, and very little debt be a bad thing? Complete and total nonsense.
After you nuts? When the company buys back shares on the open market, shareholders *are* voluntarily surrounding their shares. That is known as a “transaction.”
Companies issue shares to raise capital for expansions and acquisitions. So, why is it a bad thing for a company to do the reverse…to use excess capital to buy back outstanding shares and reduce share dilution. The shareholders who keep their shares in the corporation are effectively just enabling those who do sell their shares to reduce or eliminate their stake in the corporation. There is nothing evil about it at all.
Having $250B in cash and very little debt (which is no longer accurate, as Apple now has tens of $B in debt) can actually be a problem for a corporation. That is because a corporation is judged based on its return on capital. If the corporation is not providing a better return on that excess capital than investors could get elsewhere, then it should return it. Buybacks are a good way to do that because, unlike a dividend, they do not impose taxes on the shareholder until the shares are sold. That provides investors with more flexibility.
Stock buybacks simply concentrate corporate ownership across a smaller number of shares.- the opposite of a stock split in a sense.
No I’m not nuts, I genuinely do not feel that buybacks are a good representation of the company’s value on the open market. And if they were illegal from 1933-1983, there was a reason. Why? Because in the 20’s a lot of companies engaged in that type of behavior, artificially inflating the value of their businesses, this led to instability and the mother of all bubbles popping and tanking the investment sector as the final domino for the depression. We can’t keep doing the same things and expect different results, buybacks are a bad idea for the broader market and society, while they may help with short term dividends in the long run it doesn’t turn out well. So the shareholders should approve every buyback.